CONTINUOUS

BUSINESS PROCESS
IMPROVEMENT
Link Between Process and Strategy
 STRATEGIC MANAGEMENT

• Strategic Management: the process of determining an organization’s basic

mission and long-term objectives, then implementing a plan of action for
pursuing the mission and attaining objectives
 STRATEGIC MANAGEMENT

• Growing need for strategic

management related to increasingly
diversified operations in continuously
changing international environment
 BENEFITS OF STRATEGIC PLANNING

• 70 percent of 56 U.S. MNC subsidiaries had comprehensive 5 to 10-year plans

according to one study
• Evidence for effectiveness of planning is mixed. Strategic planning does not
always result in higher profitability
 BENEFITS OF STRATEGIC
MANAGEMENT

• Establish procedures
the mission
• Provide
Formulatefacilities
philosophy
• Provide
Establishcapital
policies
• Set
Setting
standards
objectives
• Establish
Developing programs
strategyand plans
• Control
Plan theinformation
organizational structure
• Activate
Provide personnel
people

5
 S T R AT E G I C M A N A G E M E N T
TYPES OF STRATEGIES

• Strategy
• a comprehensive plan guiding resource allocation to achieve
long-term organization goals.
• Strategic Intent
• focuses organizational energies on achieving a compelling goal.
• Competitive Advantage
• operating in successful ways that are difficult to duplicate
 T Y P E S O F S T R AT E G I E S
CORPORATE STRATEGIES

• Corporate Strategy
• Sets long-term direction for the total enterprise
• Business Strategy
• Identifies how a strategic business unit or division will
compete in its product or service domain
• Functional Strategy
• Guides activities within one specific area of operations
 T Y P E S O F S T R AT E G I E S
CORPORATE STRATEGIES
 T Y P E S O F S T R AT E G I E S
GROWTH AND DIVERSIFICATION STRATEGIES

• Growth Strategy
• Expansion through current operations
• Concentration
• Expansion within an existing business area
• Diversification
• Expansion occurs by entering new business areas
• Vertical Integration
• Expansion by acquiring existing suppliers or distributors
 T Y P E S O F S T R AT E G I E S
RESTRUCTURING AND RETRENCHMENT STRATEGIES

• Retrenchment
• Changes operations to correct weaknesses
• Liquidation
• An extreme form of retrenchment wherein the business closes and sells
off its assets
• Restructuring
• Reduces the scale or mix of operations
• Downsizing
• Decreases the size of operations
• Divestiture
• Sells off part of the organization to focus on core businesses
 STEPS TO STRATEGIC MANAGEMENT

• Environmental analysis
• Establish organizational direction
• Strategy formulation
• Strategy implementation
• Strategic control

11
 ENVIRONMENTAL ANALYSIS

• Process of examining the organization’s environment to determine:

• Strengths
• Weaknesses
• Opportunities
• Threats

12
 S T R AT E G Y F O R M U L AT I O N
SWOT
• SWOT Analysis
• Identifies Organization’s Strengths, Weaknesses, Opportunities, and Threats
• Core Competency
• A special strength that gives an organization a competitive advantage
 ENVIRONMENTAL STRUCTURE

• General environment
• Social, economic, political, legal, technical
• Operating environment
• International, supplier, labor, competition, customer
• Internal environment
• Organizational, marketing, financial, personnel, production

14
 METHODS OF ENVIRONMENTAL
FORECASTING

• Cross-impact
Expert opinionanalysis

•• Multiple
Trend extrapolation
scenarios

• Trend correlation
• Demand/hazard forecasting

• Dynamic modeling

15
 ESTABLISH ORGANIZATIONAL
DIRECTION

• Establishing an organizational direction for the company involves determining

two indicators:
• Organizational mission – the reason why the organization exists
• Objectives – measurable targets to track the growth of the business

16
 KEY OBJECTIVE AREAS

• Market standing
• Innovation
• Productivity
• Resource levels
• Profitability
• Manager performance and development
• Worker performance and attitude
• Social responsibility

17
 TYPES OF OBJECTIVES

• Profitability
• R&D
• Growth
• Diversification
• Market share
• Efficiency
• Social responsibility
• Employee welfare
• Financial stability
• Product Quality • Resource conservation
• Service • Mgt & labor development

18
 STRATEGY FORMULATION

• What are the purpose(s) and objective(s) of the organization?

• Where is the organization presently going?
• What critical environmental factors does the organization currently face?
• What can be done to achieve organizational objectives more effectively in
the future?

19
 GROWTH-SHARE MATRIX

22
Stars Question Marks
20

18
Market Growth Rate (percent)

14

12

10
Cash Cows Dogs
8

10.0 5.0 2.0 1.0 0.5 0.1

20 Market Share
Relative
 FORMULATING BUSINESS STRATEGIES

• Structural analysis of competitive forces

• Threat of new entrants
• Bargaining power of suppliers
• Bargaining power of buyers
• Threat of substitute products
• Rivalry among existing competitors
• Strategic alternatives

21
 FORMULATING FUNCTIONAL
STRATEGIES

• Operations strategy

• Financial strategy

• Marketing strategy

• Human resource strategy

22
 STRATEGY IMPLEMENTATION

• Commander approach

• Organizational change approach

• Collaborative approach

• Cultural approach

23
 COMMANDER APPROACH

• Manager determines “best” strategy

• Manager uses power to see strategy implemented
• Three conditions must be met
• Manager must have power
• Accurate and timely information is available
• No personal biases should be present

24
 COMMANDER APPROACH

• Limitations
• Can reduce employee motivation and innovation
• Advantages
• Managers focus on strategy formulation
• Works well for younger managers
• Focuses on objective rather than subjective

25
 ORGANIZATIONAL CHANGE APPROACH

• Focuses on the organization

• Behavioral tools are used
• Includes focusing on the organization’s staffing and structure
• Often more effective than Commander
• Used to implement difficult strategies

26
 ORGANIZATIONAL CHANGE APPROACH

• Limitations
• Managers don’t stay informed of changes occuring within the environment
• Doesn’t take politics and personal agendas into account
• Imposes strategies in a “top-down” format
• Can backfire in rapidly changing industries

27
 COLLABORATIVE APPROACH

• Enlarges the Organizational Change Approach

• Manager is a coordinator
• Management team members provide input
• Group wisdom is the goal

28
 COLLABORATIVE APPROACH

• Advantages
• Increased quality and timeliness of information
• Improved chances of effective implementation
• Limitations
• Contributing managers have different points of view and goals
• Management retains control over the process

29
 CULTURAL APPROACH

• Includes lower levels of the company

• Breaks down barriers between manage-ment and workers
• Everyone has input into the formulation and implementation of strategies
• Works best in high resource firms

30
 CULTURAL APPROACH

• Advantage
• More enthusiastic implementation
• Limitations
• Workers should be informed, intelligent
• Consumes large amounts of time
• Strong company identity becomes handicap
• Can discourage change and innovation

31
 T Y P E S O F S T R AT E G I E S
GLOBAL STRATEGIES

• Globalization Strategy
• Adopts standardized products and advertising for use worldwide
• Multidomestic Strategy
• Customizes advertising and products to best fit local needs
• Transnational Strategy
• Seeks efficiencies of global operations with attention to local markets
 T Y P E S O F S T R AT E G I E S
E-BUSINESS STRATEGIES

• E-Business Strategies
• Focus on Using the Internet for Business Transactions
• B2B Business Strategies
• use IT and Web portals to vertically link organizations with members
of their supply chains.
• B2C Business Strategies
• use IT and Web portals to vertically link organizations with members
of their customers.
 S T R AT E G I C M A N A G E M E N T
STRATEGIC MANAGEMENT
MODULE GUIDE 12.2

• Strategy formulation begins with the organization’s mission

and objectives.
• SWOT analysis identifies strengths, weaknesses, opportunities,
and threats.
• Porter’s five forces model examines industry attractiveness.
• Porter’s competitive strategies model examines business or
product strategies.
• Portfolio planning examines strategies across multiple
businesses or products.
• Strategic leadership activates organizations for strategy
implementation.
 S T R AT E G I C M A N A G E M E N T
S TRATE GI C MA NAGEMENT

• Strategic management
• the process of formulating and implementing strategies.
• Strategy Formulation
• the process of creating strategies
• Strategy Implementation
• the process of putting strategies into action.
 S T R AT E G I C M A N A G E M E N T
STRATEGIC MANAGEMENT
 S T R AT E G I C M A N A G E M E N T
STRATEGY FORMULATION

• Mission Statement
• The reason for the organizations existence in society
• Operating Objectives
• Specific results that organizations attempt to achieve

Common Operating Objectives of Organizations

• Profitability
• Market share
• High-quality workforce
• Cost efficiency
• Product and service quality
• Innovativeness
• Social responsibility
 S T R AT E G Y F O R M U L AT I O N
SWOT

• SWOT Analysis
• Identifies Organization’s Strengths, Weaknesses, Opportunities, and Threats
• Core Competency
• A special strength that gives an organization a competitive advantage
 S T R AT E G Y F O R M U L AT I O N
PORTER’S FIVE FORCES
 S T R AT E G Y F O R M U L AT I O N
P O RT E R ’ S F I V E F O R C E S

• Porter’s Competitive Strategies

• Differentiation Strategy
• Offers products and services that are uniquely different from the competition
• Focused Differentiation Strategy
• offers a unique product to a special market segment.
• Cost Leadership Strategy
• Seeks to operate at lower costs than competitors
• Focused Cost Leadership Strategy
• uses cost leadership and target needs of a special market.
 S T R AT E G Y F O R M U L AT I O N
PORTER’S FIVE FORCES
C O M P E T I T I V E A N A LY S I S
 S T R AT E G Y F O R M U L AT I O N
BOSTON CONSULTING GROUP (BCG)

• BCG Matrix
• Analyzes business opportunities according to growth rate
and market share
 S T R AT E G I C M A N A G E M E N T
STRATEGY IMPLEMENTATION

• Strategic Leadership
• the capability to inspire people to successfully engage in a process of continuous
change, performance enhancement, and implementation of organizational strategies.
 APPROACHES TO STRATEGIC
PLANNING

1. Economic Imperative
2. Administrative Coordination
3. Political Imperative
4. Quality Imperative
 (1) ECONOMIC IMPERATIVE:

• Economic imperative focused MNCs employ worldwide

strategy based on cost leadership, differentiation, and
segmentation
• Strategy also used when product is regarded as generic and
therefore is not sold on name brand or support service
• Often sell products for which large portion of value is added in
upstream activities of industry value chain
• Research and development
• Manufacturing
• Distribution
 (2) POLITICAL IMPERATIVE

• MNCs using political imperative are country-responsive;

approach designed to protect local market niches
• These MNCs often use country-centered or multi-
domestic strategy
• Success of product or service depends heavily on
• Marketing
• Sales
• Service
 (3) QUALITY IMPERATIVE

• Quality imperative has 2 paths

• Change in attitudes and raising of expectations for service quality
• Implementation of management practices designed to make quality improvement an
ongoing process
• TQM Total Quality Management (see next slide)
 TOTAL QUALITY MANAGEMENT

• Cross-train personnel to do jobs of all members in work group

• Process re-engineering designed to help identify/eliminate
redundant tasks
• Reward system designed to reinforce quality performance
• Quality operationalized by meeting or exceeding customer
expectations
• Quality strategy formulated at top management level and
diffused through organization
• TQM techniques: traditional inspection and statistical quality
control; cutting edge Human Resource Management
techniques such as self-managing teams and empowerment
 (4) ADMINISTRATIVE COORDINATION
IMPERATIVE

• MNC makes strategic decisions based on merits of individual situation rather

than predetermined economic or political strategy
• Least common approach to formulation and implementation of strategy
• Many large MNCs work to combine all 4 of the approaches to strategic
planning
 GLOBAL VS. REGIONAL STRATEGIES

• Fundamental Tension: The globalization vs. national

responsiveness conflict.
• Global integration: Production and distribution of
products and services of a homogenous type and quality
on a worldwide basis
• National responsiveness: need to understand different
consumer tastes in segmented regional markets and
respond to different national standards and regulations
imposed by autonomous governments and agencies
GLOBAL INTEGRATION VS.
NATIONAL RESPONSIVENESS
 SUMMARY:
APPROACHES TO STRATEGIC
PLANNING

• Appropriateness of each strategy depends on pressures for

cost reduction and local responsiveness in each country
served:
• Global strategy is low-cost strategy attempting to benefit
from scale economies in production, distribution, marketing
• Transnational strategy pursued when high cost pressures
and high demand for local responsiveness
BASIC ELEMENTS IN STRATEGIC PLANNING
FOR INTERNATIONAL MANAGEMENT
ELEMENTS OF STRATEGIC PLANNING:
ENVIRONMENTAL SCANNING
 ELEMENTS OF STRATEGIC PLANNING:
ENVIRONMENTAL SCANNING

• Provides management with accurate forecasts of trends relating to external

changes in geographic areas where firm is doing business or considering doing
business
• Changes relate to economy, competition, political stability, technology,
demographic and consumer data
 ELEMENTS OF STRATEGIC PLANNING:
INTERNAL RESOURCE ANALYSIS

• Evaluate MNC’s current managerial, technical, material,

and financial strengths and weaknesses
• Assessment then used to determine ability to take advantage of
international market opportunities
• Match external opportunities (gained in environmental scan) with
internal capabilities (gained through internal resource analysis)
• Key question for MNC: Do we have the people and resources that
can help us develop and sustain necessary Key Success Factors,
or can we acquire them?
 ELEMENTS OF STRATEGIC PLANNING:
STRATEGIC PLANNING GOALS

• Goal formulation often precedes first two steps (environmental

scanning, internal analysis)
• More specific goals for strategic plan come from external scan
and internal analysis
• Goals serve as umbrella beneath which subsidiaries and other
international groups operate
• Profitability and marketing goals almost always dominate strategic plans
• Once set strategic goals, MNC develops specific operational goals and
controls for subsidiary or affiliate level
 ELEMENTS OF STRATEGIC PLANNING:
IMPLEMENTATION

• Provides goods and services in accord with plan of action

• Plan often will have overall philosophy or guidelines to direct
process
• Considerations in selecting country:
• Advanced industrialized countries offer largest markets for goods/services
• Amount of government control
• Restrictions on foreign investment
• Specific benefits offered by host countries
 ELEMENTS OF STRATEGIC PLANNING:
IMPLEMENTATION (CONTINUED)

• Local issues
• Once country has been decided, firm must choose specific locale
• Important factors influence this choice:
• Access to markets
• Proximity to competitors
• Availability of transportation and electric power
• Desirability of location for employees coming in from outside
 ELEMENTS OF STRATEGIC PLANNING:
IMPLEMENTATION (CONTINUED)

• Production
• When exporting goods to foreign market, production has
usually been handled through domestic operations
• More recently MNCs have found that whether they export or
produce goods locally in host country, consideration of
worldwide production is important
• Recent trend away from multi-domestic approach and toward
global coordination of operations
 ELEMENTS OF STRATEGIC PLANNING:
IMPLEMENTATION (CONTINUED)

• Finance
• Transfer funds from once place in world to another, or borrowing funds in
international money markets often less expensive than relying on local sources
• Issues include
• Reevaluation of currencies
• Privatization
• Strategic issues for base of pyramid
• International new ventures and “born global” firms
 ELEMENTS OF STRATEGIC PLANNING:
IMPLEMENTATION (CONTINUED)

• Strategies for “base of pyramid” (BOP)

• Emerging market customers
• People at bottom of economic pyramid
• Marketing at BOP forces consideration of smaller-scale strategies
• International new venture and “born-global” firms
 ELEMENTS OF STRATEGIC PLANNING:
IMPLEMENTATION (CONTINUED)

• International new ventures and “born-global” firms

• Firms that engage in significant international activity a short time after being
established
• Successful born-global firms leverage a distinctive mix of orientations and
strategies
• Global technological competence
• Unique product development
• Quality focus
• Leveraging of foreign distributor competencies
FORMULATION OF MNC GOALS
 THE ROLE OF FUNCTIONAL AREAS
IN IMPLEMENTATION

• Production
• Traditionally handled through domestic operations
• Increasingly consideration of world wide production is important
• Recent trend away from scattered approach and toward global
coordination of operations
• If product labor intensive, farm out product to low-cost sites (e.g.,
Mexico)
• Marketing
• country-by-country basis
• built around well-known 4 P’s (product, price, promotion, place)
 THE ROLE OF FUNCTIONAL AREAS
(CONTINUED)

• Finance
• Normally developed at home office
• Carried out by overseas affiliate or branch
• MNCs have learned that transferring funds from one place in world to other, or
borrowing funds in international money markets often less expensive than reliance on
local sources
• Major headache is reevaluation of currencies
 SPECIALIZED STRATEGIES

• Some circumstances may require specialized strategies:

• Strategies for developing and emerging markets
• Strategies for international entrepreneurship and new ventures
 STRATEGIES FOR EMERGING
MARKETS

• The big emerging markets: Mexico, Brazil Argentina, South

Africa, Poland, Turkey, India, Indonesia, China, South Korea
• These nations have captured the bulk of investment and business
interest from MNCs and their managers in recent years.
• Emerging markets present exceptional risks due to political and
economic volatility. These risks show up in corruption, failure
to enforce contracts, red tape and bureaucratic costs, and general
uncertainty in legal and political environment.
 TWO UNIQUE STRATEGIES FOR
EMERGING MARKETS

• First Mover Strategies: significant economies associated with early entry and first-mover
positioning
• May be a narrow window of opportunity within which these opportunities can be best exploited.
• Strategies for Base of Pyramid (BOP): 4-5 billion potential customers around the globe
heretofore ignored by global business
• BOP forces global business to rethink their strategies. Must consider relationships with local
governments, small entrepreneurs, and nonprofits rather than depend on established partners
such as central government.
• BOP strategies challenging to implement
• Represents opportunity to incubate new, leapfrog technologies
• Successful BOP strategies can travel profitably to higher income markets
THE WORLD POPULATION AND
INCOME PYRAMID
 (2) ENTREPRENEURSHIP STRATEGY
AND
NEW VENTURES

• Increasingly small and medium size enterprises, often in the

form of new ventures, are becoming involved in international
management.
• The earlier in its existence an innovative firm internationalizes,
the faster it is likely to grow both overall and in foreign markets.
• Venture performance (growth and ROE) is improved by
technological learning gained from international environments.
 INTERNATIONAL ENTREPRENEURSHIP

• Defined as “a combination of innovative proactive, and risk-seeking behavior

that crosses national borders and is intended to create value in organizations”
 INTERNATIONAL NEW VENTURES AND

“BORN GLOBAL” FIRMS

• “Born global”: firms that engage in significant international

activity a short time after being established.
• Most important business strategies employed by born global
firms are global technological competence, unique products
development, quality focus, and leveraging of foreign
distributor competencies.
• Truly born global firms tend to survive longer than other
seemingly global companies.
 GLOBAL MANAGEMENT TEAM

• Transnational companies have global management teams

because they realize the need for a world view at the level of
top management.
• A management team too heavily dominated by one country
will not have a true global view.
• Input from top managers from all countries
• A good example is Imperial Chemical Industries (ICI), whose
16-person board was all British until 1982. It now includes two
Americans, one Canadian, one Japanese, and one German; 35
percent of the top 180 people are non-British.
 GLOBAL MANAGEMENT TRAINING.

• Transnational companies realize that a global culture is needed

to compete around the world.
• A company cannot attain such a culture without integrating
managers from other countries into the system.
• Cross-country training and travel are necessary to allow
managers and employees to be comfortable in the triad
cultures.
• GE adapted what it calls a Global Leadership Program. Over a
period of ten months, the top 55 people from its U.S.,
European, and Japanese medical equipment businesses met
once on each continent and in Japan for several days at a time.
 GLOBAL TRAVEL AND ASSIGNMENTS.

• The key to becoming a global power is to manage by walking around

(MBWA) the world.
• Top managers cannot understand other cultures unless they spend
substantial time in those countries regularly.
• Too many companies have top managers travel abroad, or bring
managers to headquarters, only as a ceremonial show.
• To develop global products, designers and product managers cannot rely
on market research data alone.
• American designers will have limited ability to create innovate home
and office furniture for sale in Europe and Japan if they have never seen
homes and offices in these countries. Another way to train people to
think globally is to move them across national boundaries.
 GLOBAL STRATEGY

• To be successful in the world market, global firms must pit all

their resources against competitors in a highly integrated way.
• They must have a centralized global strategy, with various
aspects of operations decentralized as economics and
effectiveness dictate.
• Transnational companies seek to respond to particular local
market needs while avoiding a compromise of efficiency of the
overall global system.
• Successful transnational companies have one global strategy,
not separate strategies for each country or profit center.
 GLOBAL COALITIONS.

• The difficulties of gaining access to foreign markets and in

surmounting scale and learning thresholds in production, technology,
and other activities have led many firms to work cooperatively among
themselves.
• Penetrating the global market requires coalitions; the go-it-alone
approach is ineffective in the world arena.
• Coalitions include a wide variety of arrangements, such as swapping
of new' products and models, licenses, supply agreements, and
cooperative R&D efforts.
• Many companies in the automobile, aircraft, robotics, consumer
electronics, pharmaceutical, and semiconductor industries have
developed complex coalitions to compensate for market share
weakness in key nations, fill market niches, and produce global
products.
 GLOBAL PAROCHIALISM.

• To go global, companies must overcome parochial attitudes, particularly the

"not-invented-here" syndrome.
• Managers must search the world, not just their home country, for the best
people, technology, and costs.
• For example, four of ICI's nine business units are headquartered outside
Britain.
 GLOBAL OPERATIONS AND PRODUCTS

• Multinational companies have major operating facilities throughout the

globe to gain market access and for cost advantage.
• They have "good citizen" images around the world. Transnational realize
that a local presence decreases political and exchange rate risks.
• Export firms are often perceived as invaders.
• They face protectionism and import restrictions and find the doors to
markets closed.
• A true insider will remain viable in the country while fellow country
export companies are excluded.
 GLOBAL DESIGN AND PRODUCT
PROCESS.
• Transnational companies centralize product design to develop
global products.
• The production process is standardized worldwide to ensure
economies of scale.
• A Whirlpool study revealed that appliances all over the world, despite
differences in consumer preferences, are basically alike in their working
components.
• Based on that study, Whirlpool is designing global products using
components supplied by different international sources, with minor changes
for local preferences.
• Ideas for improvements from country operations are shared
globally to benefit the entire company.
 GLOBAL TECHNOLOGY AND R&D

• Transnational companies realize that their success depends upon

technology and R&D.
• Such companies do not adhere to the not-invented-here mentality.
• They know that fewer than 50 percent of the world's technological
innovations can legitimately lay claim to the "Made in America" slogan
(down from 80 percent in the 1950s). Instead, they go to the place in the
world that can do the best job.
• When conducting R&D, transnational companies focus on global, not
local, products.
 GLOBAL FINANCING

• Global parochialism also extends to financing.

• Multinational organizations search world markets to get
the best rates and terms for long-term financing.
• Texas Instruments has manufacturing plants in Taiwan, Malaysia, and Japan, where interest
rates are half those in the United States, thereby allowing TI to cut capital costs.

• Short term financing is done largely in individual

countries using local financial institutions.
 GLOBAL MARKETING

• Transnational companies view North America, Europe, and

Japan as one world market, rather than three.
• They accentuate the similarities of human beings across the
global triad, rather than emphasize differences.
• With comparable income levels, education levels, academic
and cultural background, lifestyles, and access to information
and travel, Americans, Europeans, and Japanese are becoming
more and more alike.
• Because of global similarities, many products do not need to
be localized at all, or need only minor changes to satisfy taste
differences.
 GLOBAL PRODUCTS WITH LOCAL
ADAPTATIONS.
• Some transnational companies develop global products but adapt them
to the needs of local markets.
• The changes a product needs to undergo for local markets vary.
• Consumer products used in the home, such as Nestle's soups and
frozen foods, tend to be more culture-bound than products used
outside the home, such as automobiles and credit cards.
• Industrial products, such as personal computers, are inherently less
culture bound than consumer products.
• Experience also suggests that products are less culture-bound if they
are used by young people whose cultural norms are not ingrained,
people who travel in different countries, and ego-driven consumers
who can be appealed to through myths and fantasies shared across
cultures.
 GLOBAL INTRODUCTION OF
PRODUCTS.
• Transnational companies introduce new products simultaneously
throughout the world.
• Many companies have learned the hard way that introducing a product
in one country and then bringing it to another country limits global
success.
• When an American company introduces a product in the U.S., the
Japanese are watching.
• They can quickly copy the product and introduce it in Japan and other
countries before the American company can, causing the American
company to lose its leadership position.
• Gillette formally introduced its Sensor razor during the 1990 Super
Bowl in America; soon after it took the product to 19 counties
simultaneously, using virtually the same commercial.
 CONTINUOUS
BUSINESS PROCESS
IMPROVEMENT
Decision-Making Process
 DECISION-MAKING PROCESSES
AND CHALLENGES

• Managerial decision-making processes: method of choosing a course of action

among alternatives
• Process is often linear
• Looping back is common
• Managerial involvement in procedure depends on structure of subsidiaries and
locus of decision-making
DECISION-MAKING PROCESS
 DECISION MAKING

• Decision making is a key role for any manager or leader. Surprisingly many
people struggle when it comes to taking decisions. This might be due to:

• • Fear of failure
• • Lack of a structured approach
• • Procrastinating
• • Lack of clarity
 DECISION MAKING- PROBLEM
DEFINITION

• 1. Problem Definition
• Before you can start to take any decisions, you need to be absolutely clear the problem
you are trying to reach a decision on. One simple technique is just to write out in a
sentence what the problem is that you need to take a decision on.
 DECISION MAKING- ASSESS THE
IMPLICATIONS

• 2. Assess the implications

• All decisions have implications. If it is a decision at work, it has implications for you,
your peers, your team and your superiors. Depending on the decision (e.g. a promotion
at work) it may even have implications for your family, especially if it involves
relocation.
 DECISION MAKING- EXPLORE
DIFFERENT PERSPECTIVES

• 3. Explore different perspectives

• Perspectives are simply different lenses through which you look at the problem. By
exploring different perspectives you start to get a feel for those that you are most
attracted to.
 DECISION MAKING- GET CLEAR ON
YOUR IDEAL OUTCOME

• 4. Get clear on your ideal outcome

• When you are faced with a big decision, it is easy to get
lost in the detail and circumstances. An alternative is to
get clear on your ideal outcome and use this ideal
outcome to inform your choices. Imagine you aspire to be
a CFO of a Top 100 company. By having clarity on your
outcome, you can make choices on promotions and
experience linked to this ideal outcome.
 DECISION MAKING- WEIGH UP PROS
AND CONS

• 5. Weigh up pros and cons

• Another way of looking at a decision is to consider the advantages and disadvantages
of each of the options open to you. Simply listing the advantages and disadvantages of
each option is a powerful way of moving forward on decisions.
 DECISION MAKING- DECIDE AND ACT

• 6. Decide and act

• Once you have gone through the previous 5 steps, commit to a choice or course of
action and start to make it happen. To avoid procrastination, give yourself permission
to be okay with any failings that might arise.
 DECISION MAKING-

• At the end of the day there is no magic formula for decision making. Following
some simple steps and acting can however move you into the realm of effective
decision maker.
• Article Source: http://EzineArticles.com/?expert=Duncan_Brodie
 FACTORS AFFECTING
DECISION MAKING AUTHORITY
DECISION MAKING
 COMPARATIVE EXAMPLES OF
DECISION MAKING

• Decision-making philosophies and practices from country to

country:
• Do international operations use similar decision-making norms?
• French and Danish managers used different approaches to
decision-making; each more adept at different stages of the
process.
• French do not value time as much as counterparts
• German co-determination: managers focus more on productivity
and quality of goods/services than on managing subordinates.
 COMPARATIVE EXAMPLES OF
DECISION MAKING

• Most evidence indicates overall decision-making approaches used around the

world favor centralization
• MNCs based in U.S.
• Use fairly centralized decision making in managing overseas units
• Ensure that all units are operating according to overall strategic plan
• Provide necessary control for developing a worldwide strategy
 COMPARATIVE EXAMPLES
(CONTINUED)

• Japanese make heavy use of ringisei (decision making by consensus)

• Other Japanese decision-making terms:
• Tatemae: “doing the right thing” according to the norm
• Honne: “what one really wants to do”
 THE CONTROL PROCESS

• MNC methods to control overseas operations

• Most combine direct and indirect controls
• Some prefer heavily quantifiable methods; some prefer qualitative approaches
• Some prefer decentralized approaches; others greater centralization
 CONTROL PROCESS

• Three common performance measures:

• Financial performance: typically measured by profit and return on investment
• Quality performance: often controlled through quality circles
• Personnel performance: typically judged through performance evaluation techniques.
 THE CONTROLLING PROCESS

• MNCs may experience control problems

• Objectives of overseas operation and MNC may conflict
• Objectives of joint venture partners and corporate management
may not agree
• Degree of experience and competence in planning vary widely
among managers running overseas units
• Basic philosophic disagreements about objectives and polices of
international operations may exist
 TYPES OF CONTROL

• Two common complementary types:

1. Internal or external control in devising overall strategy
2. Looking at ways organization uses direct and indirect controls
 TYPES OF CONTROL:
EXTERNAL/INTERNAL:

• Internal and external perspectives of control – one is often given more attention
than the other.
• External control focus needed to find out what customers want and be prepared
to respond appropriately
• Management wants to ensure market for goods and services exist
TYPES OF CONTROL:
EXTERNAL/INTERNAL
 TYPES OF CONTROL: DIRECT
CONTROLS

• Use of face-to-face personal meetings for purpose of monitoring operations

• Examples: top executives visit overseas affiliates to learn of problems and
challenges; design structure that makes unit highly responsive to home-office
requests and communications
 TYPES OF CONTROL: INDIRECT

• Use of reports and other written forms of communication to

control operations at subsidiaries
• Financial statements
• Financial statement prepared to meet national accounting standards
prescribed by host country
• Statement prepared to comply with accounting principles and standards
required by home country
• Statement prepared to meet financial consolidation requirements of home
country
 THE CONTROLLING PROCESS

• Differences across countries:

• Great Britain
• Financial records are sophisticated and heavily emphasized
• Top management tends to focus on major problem areas; not
involved in specific matters of control
• Control used for general guidance more than surveillance
• Operating units have large amount of marketing autonomy
 THE CONTROLLING PROCESS
(CONTINUED)

• France
• Managers employ control systems closer to that of German than British
• Control used more for surveillance than guidance
• Process centrally administered
• Less systematic and sophisticated than in German companies
 THE CONTROLLING PROCESS

• U.S. vs. Europeans:

• U.S. firms rely much more on reports and other performance-related data
• Americans make greater use of output control; Europeans rely more heavily on
behavioral control
• Control in U.S. MNCs focus more on quantifiable, objective aspects of foreign
subsidiary; control in European MNCs used to measure more qualitative aspects.
PLANNING AND CONTROL
 CONTROL TECHNIQUES

• Financial performance
• Most important part of ROI calculation is profit; often manipulated by management
• Amount of profit directly related to how well or poorly a unit is judged to perform
 CONTROL TECHNIQUES

• Financial performance (continued):

• Bottom line (i.e., profit) performance of subsidiaries can be
affected by a devaluation or revaluation of local currency
• If a country devalues its currency, subsidiary export sales will
increase
• Price of goods will be lower for foreign buyers with currencies
that have greater purchasing power
• If country revalues its currency, export sales will decline
• Price of goods for foreign buyers rises since currencies now have
less purchasing power in subsidiary’s country
 CONTROL TECHNIQUES

• Quality performance: Why Japanese goods of higher quality than

goods of many other countries:
• Quality control circle (QCC)
• Japanese firms train people carefully
• Staying on technological cutting edge
• Focus on developing and bringing to market competitively priced goods
• Design, engineer, and supply people to ensure product produced at prices
customers can bear
• Fostering continuous cost-reduction efforts (kaizen)
 TOTAL QUALITY MANAGEMENT (TQM)

• Organizational strategy and accompanying techniques resulting

in delivery of high quality products or services to customers
• Critical to achieve world-class competitiveness
• Manufacturing is primary area
• U.S. automakers have greatly improved quality of their cars in recent
years
• Japanese have continuously improved quality and still have the industry
lead
 TOTAL QUALITY MANAGEMENT

• Concurrent engineering/inter-functional teams

• Designers, engineers, production specialists, and customers work together
to develop new products
• Empowerment
• Give individuals and teams resources, information, authority needed to
develop ideas and effectively implement them
• Many successful TQM techniques applied to manufacturing
• MNCs use TQM techniques
• Tailor output to customer needs
• Require suppliers use same approach
 TOTAL QUALITY MANAGEMENT

• ISO 9000 Certification

• Indirectly related to TQM
• International Standards Organization (ISO) to ensure quality products
and services
• Areas examined include design, process control, purchasing, service,
inspection and testing, and training.
• Ongoing Training
• Wide variety of forms such as statistical quality control and team
meetings --designed to generate ideas
• Objective is to apply kaizen (Japanese term for continuous improvement)
QUALITY CONCERNS